A 70% Marginal Tax Rate On The Rich? YES PLEASE, AOC.
It is time to sit down and have a chat about the 70 percent marginal tax rate proposed by Alexandria Ocasio-Cortez that is scaring the pants off of all the Republicans, making some Democrats a little nervous, and making me (as well as Paul Krugman and many other economists) very happy. OK? OK!
Now, let's first of all establish what this would even look like. Does it mean that you, a hardworking average American, will have 70 percent of your hard-earned money taken from you by the government and handed over to undeserving, lazy poors? It does not! It means that people making $10 million or more a year will have any excess of that taxed at 70 percent. That money will then be used to fund a Green New Deal -- a program advocated by economists and environmental activists alike -- that would help save our planet while creating jobs. Hopefully, some form of single-payer, universal childcare and pre-K, and some form of universal higher education would all be a part of that, because those are also things we desperately need in this country.
As most of you know, because you are smart, the top marginal tax rate under Eisenhower was 91 percent. But allow me, a lady named after Robyn Hode (best known for stealing from the rich and giving to the poor and doing it in style), to explain why it happened, why it was good, why it's not a thing anymore, and why it needs to be a thing again if we don't want this country to fall the hell apart.
The Social History!
Once upon a time in America, income inequality was really bad. The industrial revolution made some people obscenely rich, while others lived in abject poverty, sometimes jumping from burning buildings to their deaths because some rich dude kept the door locked in order to make sure no one took a bathroom break. It was horrible and cruel and miserable and people started revolting. They formed unions to protect themselves, and started embracing socialism and anarchism. They came out to hear Emma Goldman speak. They voted, in Louisiana, for people like Huey Long, a dude whose entire deal was redistributing the wealth of the nation. If you want to know how seriously people took this, check out this list of deaths in labor disputes. It is very, very long. People were willing to die for a better life. The worse things got during the Depression, the more radical people got. Bank robbers were folk heroes, robber barons were not.
Conservatives these days resent the New Deal, and in their minds, it destroyed capitalism. The fact is, the New Deal saved capitalism. FDR -- who was terrified of the previously mentioned Huey Long -- did not pass it entirely out of the goodness of his heart. He also passed it because people were demanding a lot more at the time. The most popular argument against the New Deal was that it did not go far enough. But FDR was right in that it made things OK enough for people that they chilled on demanding outright revolution.
As we all know, the marginal tax rate under Eisenhower was 91 percent. It stayed pretty high for the next several decades, not least because politicians wanted to stave off the social unrest and crime that came with income inequality. This did great things for our economy and made it so more (white) Americans were able to ascend to the middle class without needing to go into debt forever in order to do so.
Unlike, say, Wisconsin under Scott Walker -- who clearly has a very warped view of history.
This all changed after the Civil Rights Movement. Poor white racist folks in the South had previously been very, very fond of social programs, had been fond of wealth redistribution, and were not especially fond of capitalism as it had kind of screwed them. As long as they were the only ones benefiting from such things -- which is why that all changed when they no longer got to be legally better than black people. Suddenly, economic policies that would hurt them, sure, but would hurt black people more, became a little more appealing.
"N----r, n----r, n----r." By 1968 you can't say "n----r"—that hurts you, backfires. So you say stuff like, uh, forced busing, states' rights, and all that stuff, and you're getting so abstract. Now, you're talking about cutting taxes, and all these things you're talking about are totally economic things and a byproduct of them is, blacks get hurt worse than whites.… "We want to cut this," is much more abstract than even the busing thing, uh, and a hell of a lot more abstract than "N----r, n----r." -- Lee Atwater
It got to the point in the 1980s, where racist white people were so enamored with being able to complain about "welfare queens" that some of them would have watched their own children go hungry just so long as they got to do that. It was in the 1980s, with Reagan, that America truly fell in love with rich people. They watched Dynasty and Lifestyles of the Rich and Famous. They wore designer jeans, which previously would have been considered positively ridiculous.
"The disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition is the great and most universal cause of the corruption of our moral sentiments." – Adam Smith
Then and through the '90s, they watched as unions weakened, as wages stagnated, as factory workers were laid off, as Walmart came to town and put local shops out of business. And everyone was cool with it because gosh, we didn't want to be like them Commies in Russia with their bread lines! Everyone was sure the wealth would trickle down.
But, soon enough, people stopped caring about it trickling down. Soon enough, it became a matter of principle that the wealthy were able to do as they please, that we were not to take any of their "hard-earned" wealth. Soon enough, it became "this is the way it's always been, here in America," even though it wasn't.
America let itself get fucked, economically, because of racism. It doesn't have to be that way anymore!
Over the last few decades, the gap between worker pay and CEO pay has increased dramatically. Wages for workers have stagnated, while CEO pay has gone through the roof. This is the direct result of lowering the marginal tax rate.
See, back in the day, when top earners were taxed 90 percent on everything over $200,000 (about $1.7 million today), they rarely just said "Oh! Fine, I'll just pay the government a whole lot of money." Instead, they chose to pass a big chunk of that money on to their workers. It made sense to pay their workers more fairly because it was just going to be taken away anyway. Henry Ford, with all his many flaws of the anti-Semitic variety, understood that if he wanted to sell cars, workers had to be paid enough to afford cars.
This also limited the appeal of creating a ginormous corporation like Walmart -- which is a good thing. Imagine, for a moment, that all the Walmarts in this country were owned by individuals. Instead of one crazy ass bajillionaire family, we'd have 3,723 fairly wealthy people. Rather than a big chunk of the profits going to the crazy ass bajillionaire family and stock owners, they would -- more likely -- get spread out a little more among the workers. The workers, in turn, would have enough money to actually buy things beyond the necessities, which would then stimulate the economy. The more evenly wealth is distributed, the more chance anyone has to build a successful business.
As Paul Krugman points out, this is basic economics.
Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he'll barely notice it.
Also, they will put that $1,000 right back into the economy rather than hoarding it.
To put all of this more succinctly -- a marginal tax of 70 percent (or higher!) means that we all have more money. Not just more money for social programs, more money in our pockets, from our actual paychecks. Dig?
But What About The Incentive!
WHELL, says the very reasonable person, if you just give people health care, if you just give people child care, if you just house homeless people, if you just feed the hungry, if you just give heroin addicts Narcan when they overdose, if you take away the ability of people to make more money than they could ever possibly spend in their lifetime -- who will ever have any incentive to do anything?
People in this country have fallen madly in love with the idea that if people cannot get obscenely rich like Jeff Bezos or the Waltons or whomever, that no one will have any reason to reach for the stars and try their hardest and become successful. But the worse income inequality is, the harder it is for anyone else to become super rich or even just middle class. You could come up with the most amazing, life-changing product in the world, if people can't afford to buy it, you are shit out of luck.
Magical thinking is extremely comforting. All addicts will eventually hit "rock bottom" and turn their lives around. The death penalty is what keeps everyone from just going around murdering each other all the time. If people are not able to become obscenely rich, no one will ever bother to do anything.
And sure! These things might be true for some people. But should all of us be miserable over something that just feels like it's true but for which there is no actual empirical evidence? $10 million a year is a lot of money. It is so much money that only 3,755 Americans made that or more last year. Meanwhile, 89,534,313 Americans made under $35K, and 57,836,111 made under $20K. If this "incentive" magic really works, it doesn't seem to be working for anywhere near enough people to justify it.
Stop Being Afraid Of Rich People, Goddamnit!
The big threat that all the panicky right-wingers are throwing at us now is "WHAT IF ALL THE RICH PEOPLE LEAVE! WHAT WILL YOU DO THEN?"
Nothing. I will do nothing. We will all be totally fine. Ayn Rand was a bad writer and an even worse prognosticator. Even worse are the "taxation is theft!" anarcho-capitalists taking over the Republican Party who dream of a world with no social safety net and a thriving baby market instead of legal abortion. And they think we're idealists? Please. There's nothing more "idealistic" than thinking people will be totally cool with that much misery for any extended period of time without going full French Revolution.
The rich have pretty much nowhere else to go. Taxes are higher in almost every other place they could live. If there were some magical place that would tax them nothing and allow them to live in the lifestyle to which they have become accustomed, they would be there right now. So chill.
Second, if they did get up and leave, they would all be completely replaceable, by people who would be more than happy to make "only" $10 million a year plus 30% of everything they make above that. Rich people are not unicorns! We don't have a limited supply of people who could do great things in this country. It's not like we all suck and should just shut up and be grateful for whatever crumbs they throw at us. How long, exactly, must we be held hostage by these 3,755 people? Is there any kind of time frame on this?
Once upon a time, as demonstrated by that poster above, rich business owners were so afraid that we'd revolt that tissue paper companies were able to suggest that even something like giving their employees substandard paper with which to dry their hands could drive them to revolt. Let's go back to that. Let's to go back to a time when politicians were so frightened that income inequality would lead to social upheaval that they made damn sure it didn't get that bad (well, made sure it wasn't bad for white people, anyway). Let them be scared of us and not the other way around.
But isn't it just pointless to even talk about this stuff while Trump is President?
Not if we want to win the next election. It's time to get people jazzed about a future where they don't have sinking feelings of horror and dread in the pit of their stomach all the time -- either because of Trump or because we're murdering the planet or because the crowdfunding they're doing to cover their medical bills isn't going so well. Our ideas are good! They are not scary and bad and we don't have to slip them in to a dish of ice cream in order to get anyone to swallow them. I get that people don't want to hear about "enthusiasm," but there's enthusiasm for a single person because they are especially charming, and then there's enthusiasm for ideas about a better future and that kind of enthusiasm is something we need. It's time to embrace the radical idea that we don't have to be miserable.
"The form of law which I propose would be as follows: In a state which is desirous of being saved from the greatest of all plagues—not faction, but rather distraction—there should exist among the citizens neither extreme poverty nor, again, excessive wealth, for both are productive of great evil." -- Motherfucking Plato, suckers
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Robyn Pennacchia is a brilliant, fabulously talented and visually stunning angel of a human being, who shrugged off what she is pretty sure would have been a Tony Award-winning career in musical theater in order to write about stuff on the internet. In addition to her work at Wonkette, she also has a biweekly column at Dame. Follow her on Twitter at @RobynElyse